Senate Research Center   H.B. 2801
By: Giddings (West, Royce)
Intergovernmental Relations

This analysis utilizes the House Committee Report, which is the most
recent version available to the Senate Research Center, and is not
formatted to the style of the Senate Research Center.  A list of adopted
House floor amendments is attached at the end of this analysis.   


Many Texas urban communities are facing severe shortages of housing which
is affordable to lower-income households;  these households provide
workers necessary to the growth of the local economy.  At the same time,
older larger Texas cities find themselves facing a growing number of
vacant lots with property tax delinquencies.  Vacant lots contribute to
destabilization of established neighborhoods.  Lower property values,
accompanied by delinquent taxes and non-tax liens, make these properties
less desirable for new private investment.  As a result, the number of
unproductive properties in older neighborhoods continues to climb while
the fortunes of the neighborhoods fall. 

The proposed Urban Land Bank Demonstration Program Act would provide a
process and a tool to enable cities to more effectively pursue tax
foreclosure on unproductive vacant properties in return for assembling the
acquired property for placement into productive use in the development of
affordable housing.  Currently, property ordered sold pursuant to
foreclosure of a tax lien may be sold at a public auction, such as a
sheriff's sale, to the highest bidder for a bid sufficient to pay the
lesser of the aggregate amount of the judgment against the property or the
market value of the property as specified in the judgment.  This
legislation provides the means for direct sale of tax-foreclosed property
by the officer making the sale to a land bank created by a municipality
for the purpose of assembling property for affordable housing development.
At the same time, it includes protection for property owners faced with
tax foreclosure who do not want their property to be subject to this
process.  It insures that productive nonprofit Community-based Housing
Development Organizations (CHDOs) will play a strong role in developing
the housing placed in the land bank.  It also provides a means for private
developers to participate in affordable housing production, a critical
participation given the tremendous scope of the need being addressed.  The
process requires development of a local plan by the municipality,
coordination with participating taxing entities, public notice, public
participation, local accountability, and ultimately, the creation of new
housing affordable to lower income households. 

Pursuant to the Texas Property Code, properties sold for failure to pay
delinquent taxes are done so by foreclosing on a tax lien and a public
auction on the courthouse steps, usually by the sheriff or constable.
H.B. 2801 permits certain undeveloped real property to be conveyed to an
urban land bank for the development of affordable housing.  H.B. 2801
enacts the Urban Land Bank Demonstration Program Act, as Chapter 379C of
the Local Government Code. 


It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency, or


SECTION 1.  Amends Subtitle A, Title 12, of the Local Government Code by
adding Chapter  397C, Urban Land Bank Demonstration program, comprised of
the following Sections: 

Sec. 379C.001  Provides for a short title of the Act.

Sec. 379C.002  Provides that the Act would be applicable only to home-rule
cities with a population of 1.8 million or more.  

Sec. 379C.003  Defines terms used in the Act.

Sec. 379C.004  Eligible municipalities may adopt an Urban Land Bank
Demonstration Program allowing a private sale of tax-foreclosed property
by the officer making the sale to a municipally created land bank for the
purposes of affordable housing development.  The participating
municipality must establish or approve a land bank to acquire, hold and
transfer unimproved real property. 

Sec. 379C.005  In order to qualify to acquire and develop property from
the land bank, a developer must have built three or more housing units
prior to submitting a proposal to the land bank and have a development
plan for the property approved by the municipality. 

Sec. 379C.006  Participation in the Demonstration Program requires the
municipality to develop an annual plan that includes the following: a list
of the community housing development organizations eligible to exercise a
right of first refusal on the properties acquired through the program; a
list of properties anticipated for acquisition; the anticipated affordable
development on these properties; and the sources and amount of any funds
available from the municipality to subsidize development of affordable

Sec. 379C.007  Adoption of the plan must follow public notice, including
community housing development organizations and affected neighborhood
associations, a 60-day public review period and a public hearing. 

Sec. 379C.008  The bill provides an alternative to the public auction/sale
of tax-foreclosed property by allowing a direct sale by the officer making
the sale to a municipally created land bank under the following
conditions: the market value of the property is less than the amount of
taxes, non-tax liens and court and associated sale costs on the property;
the property is vacant, without buildings;  there are delinquent taxes
owed on the property for each of the last six years; there is an
interlocal agreement among the taxing entities party to the tax suit to
permit the direct sale; and within a 90-day period following notice of the
proposed direct sale, the property owner subject to the suit has not
exercised the right to the public auction/sale of the property by the
officer making the sale. 

Sec. 379C.009  The Land Bank must resell the property for construction of
affordable housing within three years of taking ownership.  The number of
properties a developer may acquire from the Land Bank is based on prior
housing production experience.  The developer must apply for a building
permit and construction financing must be in place within 24 months of
acquisition of the property or it will revert to the Land Bank. 

Sec. 379C.010 Each property sold by the Land Bank will be deed restricted
for development of affordable housing.  If the property is developed for
sale the household income of the homebuyer cannot exceed 80% of the area
median family income (AMFI) as determined by the US Department of Housing
and Urban Development (HUD) for the area in which the property is located.
No less than 25% of the properties sold by the Land Bank for sale to
homebuyers will be deed restricted for sale to families with household
incomes not exceeding 60% of AMFI. If the property is sold for development
of rental housing, the deed restrictions will require the following
occupancy restrictions: 100% of the units must be occupied by households
with incomes not greater than 60% AMFI; 40% of the units must be occupied
by households with incomes not greater than 50% AMFI; or  20% of the units
must be occupied by households with incomes not greater than 30% AMFI. The
rental property owner must file annual occupancy reports.  Deed
restrictions will renew automatically.  Either the land bank or the
governing body of the municipality may modify or add to deed restrictions;
if the municipality makes changes,  these must be adopted by the
municipality as part of its plan. 

Sec. 379C.011  Nonprofit Community Housing Development Organizations
(CHDOs) providing housing within the same area as "banked" properties will
have a right of first refusal on the purchase of the property.  The CHDO
may exercise that right within a period of not less than 9 months nor more
than 26 months.  The property may be sold to another qualified
participating developer if the CHDO does not exercise its right. 

Sec. 379C.012  The Land Bank will comply with the open meetings and open
records requirements for governmental bodies. 

Sec. 379.013  The Land Bank will: keep accurate minutes and records; keep
accurate books of account in accordance with generally accepted accounting
principals and provide annual audited financial statements to the
municipality; and provide an annual performance report to the municipality
setting forth the Land Bank's revenues and expenditures and providing a
detailed accounting of each property transaction.  Copies of the
performance report will be provided to each participating taxing entity.
Notice of availability of the report will be sent to CHDOs and
neighborhood associations for neighborhoods where "banked" properties are
located.  The performance report will be kept available for public review. 


Amend HB 2801 in the following manner:  Amend SECTION 1 by inserting after
the word "plan" on Page 9, Line 17, the following: "and must comply with
the restrictions set forth in subsections (b), (c), and (d)".